Vol. 573 No. 5
4 Mr. R. Bruton asked the Minister for Finance the number of financial institutions, the number of account holders and the overall financial sums involved in the latest form of systematic tax evasion through the use of offshore subsidiaries of Irish financial institutions. [25996/03]
I am advised by the Revenue Commissioners that there are subsidiaries of eight Irish financial institutions operating in either the Isle of Man or the Channel Islands. It is known that two further financial institutions closed their Isle of Man operations in recent years. However, it is not possible to state the total number of individual account holders in any particular financial institution.
There are three investigations ongoing at present and arising from these and other unprompted voluntary disclosures, the Revenue Commissioners have, to date, collected in excess of €118 million from persons holding funds offshore. The Revenue Commissioners will be examining all Irish financial institutions which have or have had subsidiaries operating in offshore jurisdictions with a view to establishing the identity of Irish residents holding funds in such subsidiaries in these jurisdictions.
Does the Minister share my anger that subsidiaries of Irish financial institutions appear to be used to facilitate wholesale tax evasion? Does he agree that in the case of the Isle of Man alone, the money involved, according to newspaper reports, amounts to €4 billion? This is only one of the potential offshore locations.
The financial institutions may state that these subsidiaries have no legal obligation to the Irish Revenue Commissioners, but does the Minister accept that this is good enough? It appears that employees of the financial institutions were actively facilitating the opening of offshore accounts and that their bonuses appeared to be dependent on their success in doing so? Will the Minister indicate whether he believes there is a case for the financial institutions to answer in regard to the facilitation of tax evasion? Does he believe there is a need for Irish law to be changed in some way so the parent companies would have a greater responsibility to ensure that revenue is not being abused and stashed away in this fashion?
The Deputy referred to a figure of €4 billion as allegedly being held offshore in accounts in the Isle of Man. I presume he is referring to a KPMG study of 1999, which mentioned such a figure. The Revenue Commissioners are not in a position to state what the total amount held offshore may be and how much it relates to tax evasion.
It is not illegal to hold an offshore account and there may be a legitimate commercial reason for the maintenance of such an account. In addition, an individual or resident in the State may not be ordinarily resident or domiciled in the State and therefore would only be taxable to the extent that income was remitted to the State. However, the results of Revenue Commissioners inquiries to date indicate that a considerable number of these accounts may have been opened for the purpose of evading tax.
As the chairman of the Revenue Commissioners stated in a recent appearance before the Committee of Public Accounts, almost all the positive developments regarding revenue collection in this area can be attributed to the changes to the powers of the Revenue Commissioner that I introduced in the Finance Act 1999. Offshore accounts are held in subsidiaries of Irish institutions which are located abroad and may not be amenable to High Court orders, but the Revenue Commissioners have used their powers under the 1999 Act to address the particular scores they have. As I pointed out, they are currently investigating three Irish financial institutions and, over a period of time, will investigate all the others that are involved.
I accept what the Minister is saying and, although I was not spokesperson on finance when the legislation was introduced, I am sure he introduced commendable provisions. However, do we still not have financial institutions that appear to be actively promoting and facilitating tax evasion? Furthermore, it seems the Revenue Commissioners are not in a position to prosecute any of these financial institutions. Is this not indicative of a serious breakdown in confidence on the part of the State in financial institutions? What is the Minister's view on the way offshore accounts are being used? What are the lessons for public policy? What will the Minister say to the financial institutions about the terribly alarming findings when he next has an opportunity to meet them?
By coincidence, I will be in the company of bankers tonight because I will address the Institute of Bankers at its annual dinner, as I have done for some years. It is only fair to point out that the changes introduced in the Finance Act 1999 have enabled the Revenue Commissioners to undertake the investigations in which they are engaged. Other replies to parliamentary questions tabled today give examples of a quite substantial sum of money collected in one such operation. The powers given to the Revenue Commissioners are working. There are eight Irish financial institutions operating in either the Isle of Man or the Channel Islands and it is known that two others closed their Isle of Man operations in recent years. All these will be investigated by the Revenue Commissioners in due course using their existing powers. If further powers are needed in this area – I have not been asked to provide for such powers by the Revenue Commissioners – I will consider them.
On the general question raised by the Deputy, aiding or abetting tax evasion by officers of financial institutions is a criminal offence and has been for some time. The Revenue Commissioners will take that into account in assessing whether charges should be brought. It has always been an offence to aid and abet in the area of tax evasion.
5 Ms Burton asked the Minister for Finance the total amount of money established to date to have been held in offshore bank accounts in the Isle of Man or elsewhere, with a view to tax evasion in regard to all investigations carried out by the Revenue Commissioners; if there is an estimate of the amounts currently held in such accounts; if there are plans to take action in respect of financial institutions or those working in such institutions who may have facilitated the opening and maintenance of such accounts; and if he will make a statement on the matter. [25932/03]
I am advised by the Revenue Commissioners that their offshore assets group has begun an extensive investigation into the use, for the purposes of tax evasion, of offshore bank accounts and trusts by Irish residents. These investigations are at an early stage and the commissioners advise me that they are not yet in a position to establish the total amount held offshore in respect of the cases which have reached settlement as the funds in respect of which these tax settlements were made would have been deposited or held abroad over different periods. Understandably, the immediate focus of the commissioners is on their current investigations but they will, in due course, carry out whatever analysis is possible of tax settlements to obtain an estimate of the funds held abroad for the purposes of tax evasion.
The offshore assets group of the Revenue Commissioners has been examining the operation of offshore accounts since the autumn of 2001 and three financial institutions are currently under inquiry with regard to the offshore activities of their subsidiaries. Arising from these investigations and other voluntary disclosures, the commissioners have to date collected in excess of €118 million from persons holding funds offshore.
The Revenue Commissioners will examine all financial institutions which have or have had subsidiaries operating in offshore jurisdictions with a view to establishing the identity of residents holding funds in these jurisdictions. The investigations, while seeking to establish the identity of residents holding offshore accounts, are also focusing on the institutions' compliance with general tax law and their obligations under the Finance Acts 1992 and 1995 to report to Revenue where they facilitated the opening of an offshore account or the sale of a material interest in an offshore fund.
The chairman of the Revenue Commissioners recently stated before the Committee of Public Accounts that Revenue would pursue the issue of aiding and abetting tax evasion where evidence emerged that this had occurred. The commissioners are also committed to including aiding and abetting as a prominent feature in all future prosecution programmes.
In the light of this disclosure, will the Minister withdraw the stupid remark he made on RTE some time ago in which he dismissed any suggestion that tax avoidance and evasion were
chronic diseases among certain sections of society? Will he also acknowledge that there was and is a substantial pot of gold which has avoided tax and that collecting the rest of it is essential if we are to repair our creaking education and health services on behalf of compliant taxpayers?
Will the Minister accept that low taxes on income bring a requirement and obligation for all to pay and do not mean that some do not have to pay, which appears to be what many, particularly the rich and wealthy, believe? Will he acknowledge that he, his party and the Progressive Democrats were wrong to suggest there was not widespread tax evasion?
Were all the offshore schemes the product of bank clerks in Caherciveen, Blanchardstown and elsewhere? What does the Minister propose to do with regard to the ethical and moral responsibility of the banking institutions for schemes which facilitated widespread tax avoidance and, in particular, evasion by citizens? Does he propose, for instance, to retain or perhaps even extend the levy on the financial institutions which derived major advantages from the reduction in corporation tax? The schemes cannot have been dreamed up by bank clerks working at counters around the country. They were paid incentives and bonuses and led by the nose by the leadership of the institutions for which they worked.
When the Minister breaks bread with the banks tonight, as he stated he intends to do, will he say "shame" to them for robbing and facilitating the robbery of much needed money from our health and education services by somehow – perhaps by means of osmosis given that, legally, they have nothing to do with it – spiriting away tens of millions of pounds? I note he has stated—
As the time allocated for this question has been exhausted, the Minister will not have an opportunity to reply.
—that the money collected from the Bank of Ireland trust in Jersey now stands at €118 million, which amounts to about €8 million collected per week thus far.
I do not need to point out to the Deputy that tax evasion is not just an Irish experience but occurs wherever taxes have been introduced.
The Minister stated on RTE that tax evasion did not exist.
Furthermore, there is evidence to suggest that in central European countries such as Germany and France the level of tax evasion is substantial. Even if direct tax rates were reduced to 1%, I am sure some would not pay tax. That is an unfortunate fact of life.
The Minister meets such people all the time. Does he condone tax evasion?
The majority of taxpayers and business people are compliant in their tax affairs. I suggest that the level of compliance has increased during the past decade. Anecdotally and from observation, I estimate that the level of tax evasion, on which nobody can put a figure, is much lower than it was ten, 20 and 30 years ago. There have been examples of serious tax evasion in recent years and going back 20, 30, 40 and 50 years. New powers have been given to the Revenue Commissioners and the attitude to tax compliance is much different in 2003 than it was, say, in 1963 or 1973.
With regard to the Deputy's questions on the financial institutions, as I stated in my reply to Deputy Richard Bruton, it was and remains an offence to aid and abet tax evasion. I am sure the Deputy's reference to a levy concerned the additional stamp duty I introduced in last year's budget for the financial institutions. This will apply in 2003, 2004 and 2005.
